Designing flexible procurement systems

The systems used for the procurement of buildings are organizational systems. They involve people in a series of strategic decisions, and a pattern of roles, responsibilities and relationships that combine to form the organizational structure of the project. To ensure effectiveness of the building team, this organizational structure needs to be contingent upon the environment within which the construction project takes place. In addition, a changing environment means that the organizational structure within a project needs to be responsive, and dynamic. These needs are often not satisfied in the construction industry, due to the lack of analytical tools with which to analyse the environment and to design appropriate temporary organizations. This paper presents two techniques. First is the technique of "Environmental Complexity Analysis", which identifies the key variables in the environment of the construction project. These are classified as Financial, Legal, Technological, Aesthetic and Policy. It is proposed that their identification will set the parameters within which the project has to be managed. This provides a basis for the project managers to define the relevant set of decision points that will be required for the project. The Environmental Complexity Analysis also identifies the project's requirements for control systems concerning Budget, Contractual, Functional, Quality and Time control. The process of environmental scanning needs to be done at regular points during the procurement process to ensure that the organizational structure is adaptive to the changing environment. The second technique introduced is the technique of "3R analysis", being a graphical technique for describing and modelling Roles, Responsibilities and Relationships. A list of steps is introduced that explains the procedure recommended for setting up a flexible organizational structure that is responsive to the environment of the project. This is by contrast with the current trend towards predetermined procurement paths that may not always be in the best interests of the client.

Comparative costs of the commercial process in different construction procurement methods

The commercial process in construction projects is an expensive and highly variable overhead. Collaborative working practices carry many benefits, which are widely disseminated, but little information is available about their costs. Transaction Cost Economics is a theoretical framework that seeks explanations for why there are firms and how the boundaries of firms are defined through the “make-or-buy” decision. However, it is not a framework that offers explanations for the relative costs of procuring construction projects in different ways. The idea that different methods of procurement will have characteristically different costs is tested by way of a survey. The relevance of transaction cost economics to the study of commercial costs in procurement is doubtful. The survey shows that collaborative working methods cost neither more nor less than traditional methods. But the benefits of collaboration mean that there is a great deal of enthusiasm for collaboration rather than competition.

What are the costs of procurement and who bears them?

The costs of procurement are transaction costs which are separate from the direct costs of a project. In this paper discussion is concentrated on costs of tendering. Types of cost, including money costs and opportunity costs, short-term and long-term costs, private and social costs are defined and examined in relation to various types of product and methods of procurement. The costs of the contractor and of the client are considered and tentative conclusions drawn as to who bears these costs in the short-run and in the long run. They may fall on the parties to the process for the particular project, on other contractors and clients or on society as a whole.

The business case development process in the delivery of NHS infrastructure

There is a lack of knowledge base in relation to experiences gained and lessons learnt from previously executed National Health Service (NHS) infrastructure projects in the UK. This is in part a feature of one-off construction projects, which typify healthcare infrastructure, and in part due to the absence of a suitable method for conveying such information. The complexity of infrastructure delivery process in the NHS makes the construction of healthcare buildings a formidable task. This is particularly the case for the NHS trusts who have little or no experience of construction projects. To facilitate understanding a most important aspect of the delivery process, which is the preparation of a capital investment proposal; steps taken in developing the business case for an NHS healthcare facility are examined. The context for such examination is provided by the planning process of a healthcare project, studied retrospectively. The process is analysed using a social science based method called ‘building stories’, developed at the University of California-Berkeley. By applying this method, stories or narratives are constructed around the data captured on the case study. The findings indicate that the business case process may be used to justify, rather than identify, trusts’ requirements. The study is useful for UK public sector clients as well as consultants and professionals who aim to participate in the delivery of healthcare infrastructure projects in the UK.

Standardization of procurement: National or international?

The ISO has issued a Draft International Standard on construction procurement and the British Standards Institute is drafting a standard based upon this for use in the UK. Three questions arise from these observations. First, what kind of consultation processes would be adequate to ensure that such a standard meets the requirements of an industry as diverse as construction? Second, why would an international standard be inappropriate for use in a country like UK? Third, what sort of issues should such a standard seek to cover? There are strong precedents for process standards, such as quality assurance, design management and workmanship on building sites. So the idea of a standard on procurement is not unusual. Moreover, there are many differences in tendering and procurement practice that are wasteful and even collusive or illegal. These issues are explored with a view to offering insights and suggestions for guidance based on the experiences in UK. The research method is first-hand observation of the drafting committee who are dealing with the British Standard. As an example to test and inform the standardization concept, six different standard guidance documents on tendering procedures are compared. This reveals a significant degree of diversity, and based on this, nine stages for implementing a tendering procedure are derived.

A design of e-procurement infrastructure model for public service sector

Procurement is one of major business operations in public service sector. The advance of information and communication technology (ICT) pushes this business operation to increase its efficiency and foster collaborations between the organization and its suppliers. This leads to a shift from the traditional procurement transactions to an e-procurement paradigm. Such change impacts on business process, information management and decision making. E-procurement involves various stakeholders who engage in activities based on different social and cultural practices. Therefore, a design of e-procurement system may involve complex situations analysis. This paper describes an approach of using the problem articulation method to support such analysis. This approach is applied to a case study from UAE.

The tendering process and performance analysis of a public building project in Ghana

A case study on the tendering process and cost/time performance of a public building project in Ghana is conducted. Competitive bids submitted by five contractors for the project, in which contractors were required to prepare their own quantities, were analyzed to compare differences in their pricing levels and risk/requirement perceptions. Queries sent to the consultants at the tender stage were also analyzed to identify the significant areas of concern to contractors in relation to the tender documentation. The five bidding prices were significantly different. The queries submitted for clarifications were significantly different, although a few were similar. Using a before-and-after experiment, the expected cost/time estimate at the start of the project was compared to the actual cost/time values, i.e. what happened in the actual construction phase. The analysis showed that the project exceeded its expected cost by 18% and its planned time by 210%. Variations and inadequate design were the major reasons. Following an exploration of these issues, an alternative tendering mechanism is recommended to clients. A shift away from the conventional approach of awarding work based on price, and serious consideration of alternative procurement routes can help clients in Ghana obtain better value for money on their projects.

Pushing the boundaries of the social: private agri-food standards and the governance of Fair Trade in European public procurement

The article explores how fair trade and associated private agri-food standards are incorporated into public procurement in Europe. Procurement law is underpinned by principles of equity, non-discrimination and transparency; one consequence is that legal obstacles exist to fair trade being privileged within procurement practice. These obstacles have pragmatic dimensions, concerning whether and how procurement can be used to fulfil wider social policy objectives or to incorporate private standards; they also bring to the fore underlying issues of value. Taking an agency-based approach and incorporating the concept of governability, empirical evidence demonstrates the role played by different actors in negotiating fair trade’s passage into procurement through pre-empting and managing legal risk. This process exposes contestations that arise when contrasting values come together within sustainable procurement. This examination of fair trade in public procurement helps reveal how practices and knowledge on ethical consumption enter into a new governance arena within the global agri-food system.